Call rate hike: Trai says 5p, cos say 50p

The empowered group of ministers (EGoM), headed by home minister P Chidambaram, on Friday proposed to the cabinet a reserve price for auction of spectrum that is lower by a fifth of the Telecom Regulatory Authority of India (Trai) recommended price.

This will mean an increase in tariff by up to 5 paise a minute, in line with Trai projections. The industry, however, said the impact could be 10 times higher.

“It will result in an increase in tariff of about 40 to 50 paise a minute,” Cellular Operators Association of India (COAI) director general Rajan S Mathews said.

The EGoM proposed two reserve prices of between Rs. 14,000 crore and Rs. 16,000 crore, a senior official told HT, while the Trai recommended price was Rs. 18,000 crore for 5 MHz of spectrum in the 1,800-MHz band.

But the lower reserve price will come with a higher spectrum usage charge (SUC) — percentage of revenue that an operator has to pay the government every year.

If the reserve price is Rs. 14,000 crore, the SUC will come to around 6% of revenues. Trai had recommended an SUC of 3% at a reserve price of Rs. 18,000 crore.

The EGOM also proposed to allow the operators to defer spectrum fee payments. GSM companies will have to pay 35% of the spectrum fee upfront, while CDMA players will have to pay 25%. The balance will be paid after two years in 10 equal instalments.

"Reducing the reserve price is a step in the right direction," Mathews said, adding, "We believe it (revenue share) should come down to 1%."

But the Association of Unified Service Providers of India (AUSPI) secretary general SC Khanna disagreed. "There is nothing much in today's decision," he said. "We want a price of Rs. 3,500 crore for 5 MHz of spectrum."